When the accident occurs, the insurance companies pay. It is the same situation in which the issuers of Credit Default Swaps (CDS) on Greek debt find themselves, derivatives which ensure coverage against the risk of Greek default. Tomorrow Isdia, the international association of derivative instruments, will decide whether to define the Greek case as a "credit event" or not. The downgrade by Standard & Poor's of the Greek rating to Sd, selective default, affects the final decision.
Should Isdia decide that the credit event has actually occurred the payment clauses of the CDS would be triggered, the value of which has been estimated at around three billion euros. Today the same derivatives on Greece over five years have shot up at 75%.
